Protein kinase Cθ (PKCθ) is a novel PKC that plays a key role in T lymphocyte activation. To understand how PKCθ is regulated in T cells, we investigated the properties of its N-terminal C2 domain that functions as an autoinhibitory domain. Our measurements show that a Tyr(P)-containing peptide derived from CDCP1 binds the C2 domain of PKCθ with high affinity and activates the enzyme activity of the intact protein. The Tyr(P) peptide also binds the C2 domain of PKCδ tightly, but no enzyme activation was observed with PKCδ. Mutations of PKCθ-C2 residues involved in Tyr(P) binding abrogated the enzyme activation and association of PKCθ with Tyr-phosphorylated full-length CDCP1 and severely inhibited the T cell receptor/CD28-mediated activation of a PKCθ-dependent reporter gene in T cells. Collectively, these studies establish the C2 domain of PKCθ as a Tyr(P)-binding domain and suggest that the domain may play a major role in PKCθ activation via its Tyr(P) binding.